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A Historical Perspective An Interisle White Paper
Prepared by: Interisle Consulting Group, LLC 39 S Russell Street Boston, MA 02114 http://www.interisle.net Lyman Chapin +1 617 686 2527 email@example.com Chris Owens +1 617 413 3734 firstname.lastname@example.org
ISP Peering and Interconnection
About this Report
Studies of Internet Service Provider (ISP) interconnection arrangements have been performed from many different perspectives, including the technical architecture of exchange points, the business and economic models that underlie peering and transit agreements, and the interaction between market-driven interconnection arrangements and public policy (at both the national and international levels). These studies have been extensively reported and analyzed (see Sources and References). This report is intended to provide an historical context for, and concise summary of, the evolution of ISP interconnection—how it originated, how it developed, and how it is practiced today—without exhaustively reiterating information that is available from other sources. The goal of this report is to describe the way in which the self-organized and selfregulating structures that govern today’s global Internet—including the arrangements that enable ISPs to connect their networks to each other—have evolved naturally, over a period of roughly 35 years, according to principles that are deeply embedded in the Internet architecture. These structures are selforganized and self-regulating not because the Internet is an anachronistic “untamed and lawless wild west” environment, but because years of experience have shown that self-management is the most effective and efficient way to preserve and extend the uniquely valuable properties of the Internet. Following an introduction to ISP interconnection in section 1, section 2 of this report describes the way in which today’s model of ISP interconnection has evolved over the past 35 years in parallel with the evolution of the Internet architecture. Section 3 describes the economics and management structures that have emerged from that process to govern today’s Internet. Section 4 identifies new challenges that have emerged since the turn of the century to the traditional arguments for and against the regulation of ISP interconnection. Section 5 summarizes the conclusions of the report. Section 6 contains a list of sources and references.
Copyright © 2005 Interisle Consulting Group, LLC. All Rights Reserved
Copyright © 2005 Interisle Consulting Group.S. and the U. Beranek and Newman) developed the hardware and software for the first ARPAnet nodes installed in 1969. He was a principal architect of the Open Systems Interconnection (OSI) reference model and protocols. acquired two other regional networks (BARRnet and SURAnet).S. which became one of the first commercial Internet Service Providers (BBN Planet) in 1993. protocols. Chapin was Chief Scientist at BBN Technologies. BBN operated the NSFnet regional network NEARnet. Beginning in 1989. Mr. Chapin has served as the chairman of the Internet Architecture Board (IAB). Mr. co-founder and trustee of the Internet Society (ISOC). standards area director for the Internet Engineering Steering Group (IESG). the Special Interest Group on Data Communication of the Association for Computing Machinery (ACM SIGCOMM). service.net . U. and was separately incorporated in 2000 as Genuity. and international standards committees responsible for network and transport layer architecture. Chapin has also served as a Director of the Internet Corporation for Assigned Names and Numbers (ICANN). representative to the networking panel of the NATO Science Committee. and protocol standards. and during almost three decades of international technical and diplomatic leadership has played a key role in the development of the network routing and interconnection architecture. All Rights Reserved www. and U.S.ISP Peering and Interconnection Page 2 About the Author Lyman Chapin has actively contributed to the development and evolution of the technologies and self-governance structures of what is now the Internet since 1977. LLC.interisle. Before co-founding Interisle Consulting Group. He is a Fellow of the Institute of Electrical and Electronics Engineers (IEEE). and policy framework that support today’s globally pervasive Internet. Mr. representative to the computer communications technical committee of the International Federation for Information Processing (IFIP TC6). which (as Bolt. and is the co-author of Open Systems Networking—TCP/IP and OSI.
around the block or around the world. institutional. LLC. Interconnection is the glue that holds the Internet together.net . Internet Peering Ecosystem (see Sources and References). joined to each other by interconnection arrangements. The unregulated marketdriven model on which today’s global interconnection arrangements are based has developed over the past three decades in parallel with the development of the Internet itself. the economics of interconnection. All Rights Reserved www. the range of choices that are available to participants. As a result. Bill Norton coins the roughly equivalent term Internet Peering Ecosystem: “a community of loosely affiliated network operators that interact and interconnect their networks in various business relationships. the nature of Internet interconnection agreements.S. and the number and variety of 1 In The Evolution of the U. End users see the seamless. ISP Interconnection1 allows traffic originating at a source connected to one ISP’s network to reach a destination connected to another ISP’s network. circuit-switched telephony world. global. and studies by a wide variety of public and private organizations2 have repeatedly concluded that it represents the most effective and efficient way to provide ubiquitous public Internet connectivity without being either anti-competitive or inequitable. owned and operated by many different corporate.” 2 An excellent summary of the case that these studies collectively make for the unnecessity of ISP interconnection regulation is contained in FCC Office of Plans and Policy (now Office of Strategic Planning and Policy Analysis) Working Paper 32. behind the scenes lie many individual networks.interisle. and governmental entities. Copyright © 2005 Interisle Consulting Group. despite the fact that no single network operator could possibly provide Internet access in every part of the world. for reasons that are intrinsic to the architecture of the Internet and how it has evolved. Internet interconnection is fundamentally different from interconnection in the traditional.ISP Peering and Interconnection Page 3 1 Introduction Internet Service Providers (ISPs) connect their networks to each other in order to exchange traffic between their customers and the customers of other ISPs. Interconnection enables the Internet as a whole to be ubiquitously fullyconnected. ubiquitous communication medium known as the Internet. The Digital Handshake: Connecting Internet Backbones (see Sources and References).
at which two or more ISPs make technical and administrative arrangements to exchange traffic. 2 The Origins of Interconnection As we observe it today. terminals. is the common operating mode throughout the Internet.ISP Peering and Interconnection Page 4 participants in the market are different from their counterparts in the telephony world. Department of Defense funded several projects to build homogeneous networks before Bob Taylor. All Rights Reserved .interisle.S.” www. Early efforts to connect computers to each other led to “networks” based on a variety of different proprietary communications technology and protocols. using the standard Internet Protocol3. it is a management feature necessitated by the fact that the ownership and administration of the physical components of the Internet infrastructure are distributed among many different commercial. which enables networks based on different telecommunication technologies and protocols to exchange data. there is an important distinction between internetworking. LLC. Today internetworking. and governmental organizations. “computer communication” meant connecting I/O and storage peripherals (such as card readers. noncommercial. and printers) to resolutely self-contained mainframe computers. before LANs and PCs. In the 1950s and 1960s. who took 3 The standard Internet Protocol is the “IP” in the familiar acronym “TCP/IP.1 Networking Neither internetworking nor interconnection were features of the Internet’s most distant precursors. interconnection takes place at specific public and private exchange points. ISP interconnection is not an intrinsic technical feature of the Internet. and interconnection. The Information Processing Techniques Office (IPTO) of the Advanced Research Projects Agency (ARPA) of the U. 2.net Copyright © 2005 Interisle Consulting Group. which enables the owners and operators of different networks to collaborate as business entities in the provision of seamless end-to-end Internet connectivity to all of their individual customers. Thus.
2 Internetworking It is remarkable to realize that the very earliest thinking4 about what a “network of networks”—an “internet”—should be embraced the three key concepts that underlie the architecture of today’s global Internet: 1) The concept of packet switching. but as the number of networks grew. through 1970)5. (c) messages broken into equal-size packets.ISP Peering and Interconnection Page 5 over as IPTO head in 1966. it was possible to exchange information between them by building a translator. culminating in the July 1968 ARPA request for proposals for the interconnection of four ARPA research sites into what would be called the ARPAnet. (b) no central control.interisle. 5 ALOHAnet was a radio network. UK. (d) variable routing of packets depending on the availability of links and nodes.net . in Leonard Kleinrock’s work at UCLA in Los Angeles. and the idea of contention for channels was widely familiar in the radio context. 4 In the early to mid-1960s. Copyright © 2005 Interisle Consulting Group. 2. All Rights Reserved www. recruited Larry Roberts to design a “distributed communications network” which laid the foundation for the ARPAnet. which originated in the multi-access channels of ALOHAnet at the University of Hawaii (by Abramson. LLC. When there were just a few of these homogeneous networks. and in Donald Davies’s work at the National Physical Laboratory in Teddington. CA. the n-squared scaling inefficiency of pair-wise translation led to the idea of “internetworking”—creating a network of networks. it was Bob Metcalfe’s brilliant leap from ALOHA to Ethernet (at PARC in 1973) that brought the concept of stochastic (non-deterministic) channel access into the networking mainstream. All three concluded that the strongest communication system would be a distributed network of computers with (a) redundant links. 2) The concept of best-effort service. CA. and (e) automatic reconfiguration of routing tables after the loss of a link or node. which originated in at least three distinct places during 1961-1965: in Paul Baran’s work at the RAND corporation in Santa Monica. and Binder. Kuo.
later Cyclades (Louis Pouzin). Government agencies to 6 7 Dubbed “1822. The first papers describing “packet network interconnection” were published by Vint Cerf and Bob Kahn in 1973. lines leased from the telephone company. and operating the network was established at the very first NWG meeting. LLC. Defense Department contractors who were permitted to use it led other U. 2. Other packet networks. and the IMPs communicated with each other over 56Kb/sec. PSS. the ARPAnet began using IP in 1977. whether foreseen or unforeseen.S.net . At the outset. All Rights Reserved www. and has carried through to the governance structures that oversee the Internet today—particularly the Internet Engineering Task Force (IETF).” after the serial number of the BBN report that described it. the ARPAnet was not an “internet”—each of its four computer hosts was connected to an Interface Message Processor (IMP) by a proprietary serial link and protocol6. Initially the Packet Radio Network (Bob Kahn) and Packet Satellite Network (Larry Roberts).S. were being developed at the same time7. Datapac. The tradition of self-management by the people designing.3 Interconnection The clearly evident usefulness of the ARPAnet to the U. rather than tailored specifically for a single application (as the public switched telephone network had been purpose-built for the single application of analog voice communication). and Transpac. and the X. Copyright © 2005 Interisle Consulting Group. using an ARPAnet-specific “host-to-host protocol” that was referred to as the Network Control Program (NCP).ISP Peering and Interconnection Page 6 3) The concept of application independence—that the network should be adaptable to any purpose. in 1969.interisle.25-based networks that became Telenet. installing. based on other protocols. From the beginning the ARPAnet was managed by an informal and mostly selfselected group of engineers and managers who began meeting as the Network Working Group (NWG) in the summer of 1968.
ARPA. NASA Space Physicists followed with SPAN. disgruntled computer scientists9 who could not connect to one of the government-controlled networks established CSNET for the (academic and industrial) computer science community. Eventually.. The prevalence of highly restrictive AUPs provided little incentive for the networks to interconnect. www. These interconnection points were managed by two informal groups of engineers and managers. The interconnection regime was designed primarily to isolate the regions within the emerging technologically uniform IP “internet” that were subject to different acceptable use policies.g.interisle. 2. to conduct research funded by a particular government agency). 9 Led by Rick Adrion. DoE's High Energy Physicists responded by building HEPNet. these early networks were restricted to closed communities defined by an “acceptable use policy” (AUP) that specified the uses to which the networks could legitimately be put (e.net Copyright © 2005 Interisle Consulting Group. LLC.ISP Peering and Interconnection Page 7 develop similar networks8. AT&T’s wide dissemination of the Unix operating system encouraged the creation of USENET. and initially they did not.S. With the exception of BITNET and USENET. CA (FIX-West). and Larry Landweber. All Rights Reserved .3. David Farber. DoE.1 Federal Internet Exchanges The practical awkwardness of operating multiple non-communicating networks eventually led to the establishment of two exchange points for federally-funded networks operated by NASA. and NSF: the Federal Internet Exchanges at the University of Maryland (FIX-East) and NASA’s Ames Research Center in Mountain View. Department of Energy (DoE) built MFENet for its researchers in Magnetic Fusion Energy. which linked academic mainframe computers. the Federal Networking Council (for administrative matters) and the Federal Engineering Planning Group (for technical matters). 8 The U. based on the Unix UUCP communication protocols. and in 1981 Ira Fuchs and Greydon Freeman developed BITNET.
David Farber (University of Delaware).ISP Peering and Interconnection Page 8 2. It provided TCP/IP interfaces with USENET.3. and a host of other issues. which was created in 198110 under a grant from the National Science Foundation .interisle. This agreement was the turning point at which the evolution of commercial network interconnection began. because no mechanism existed to reconcile the different Acceptable Use Policies of the two networks. and Peter Denning (Purdue University). In modern terms. All Rights Reserved www. Copyright © 2005 Interisle Consulting Group. Anthony Hearn (Rand Corporation). and those who could not (connecting instead to CSNet). and established nameserver databases to enable any computing researcher to locate any other.” or interconnection without explicit accounting or settlement.25 networks. A landmark agreement between NSF and ARPA allowed NSF grantees and affiliated industry research labs access to ARPAnet. and commercial X.2 CSNet and NSFnet The USENET. contractual. the bureaucratic complexity of which daunted even the most fervent advocates of interconnection—until the CSNet managers came up with the idea that we now call “peering. BITNET. 10 by Larry Landweber (University of Wisconsin). The purpose of CSNET was to link all of the computer science departments and industry labs engaged in computing research. financial.net . as long as no commercial traffic flowed through ARPAnet.25 networks could not be connected to the ARPAnet (or to the other federal networks that were interconnected at the FIXes) because of the government policy limiting ARPAnet to government agencies and their contractors. BITNET. The turning point that eventually brought them all together was the CSNET project. The development of CSNet highlighted the disconnect between the “haves” and the “have nots” in the computing research community—between those who could find a government agency or contractor to sponsor their connection to the ARPAnet. This disconnect persisted as both sides assumed that any agreement to exchange traffic would necessarily involve the settlement of administrative. and the X. we would say that the customers of one ISP (ARPAnet) could not communicate with the customers of another ISP (CSNet). LLC.
the potential complexity of hundreds or thousands of ad-hoc bilateral arrangements pointed to the need for 11 By Peter Ford. Pacific Bell.interisle. the NSFnet had become the backbone of the modern Internet. a high-speed backbone connecting its supercomputing research centers. www. By 1990.4 Commercial Internet Exchange Points As the number and diversity of NAPs increased. 2. and in 1996. as the National Science Foundation began the transition to private ownership and management of the NSFnet infrastructure. and Steve Wolff. NSF handed over its management to commercial Internet Service Providers (ISPs). Bob Aiken. Ameritech. a NAP operator was required to provide and operate an interconnection facility on a nondiscriminatory basis. 2.>> As the original NAPs (also referred to as Metropolitan Area Exchanges. many network providers began creating their own private NAPs.ISP Peering and Interconnection Page 9 NSF went on to sponsor NSFnet.3 Network Access Points In 1993. or MAEs) became increasingly congested.net Copyright © 2005 Interisle Consulting Group.3. privately owned and operated Network Access Points (NAPs). LLC. Hans-Werner Braun. and MFS. These NAPs were the first commercial Internet exchange points. using published pricing and established technical operating specifications.where any interested party could co-locate equipment and connect its network to the NFSnet backbone or to other networks. using routers. Under the terms established by the NFS. operated by Sprint. NSF also commissioned the development11 of a deliberate architecture of backbones and regional networks that introduced the idea of hierarchy into the Internet topology. <<CIX in San Diego was the first to engineer the interconnection at the IP layer. it established four geographically distributed. which extended the commercial Internet exchange model yet further.3. All Rights Reserved .
traffic routing based on sophisticated criteria.ISP Peering and Interconnection Page 10 an overarching.3. or ISPs.net . but the opportunity to achieve better performance. serving the same or different markets. and clearing and settlement of charges between parties). Internet Service Providers. correspond to a strict hierarchy of ISPs and backbone providers as business entities. billing.” which provided a uniform set of technical and administrative services (e. to interconnect in ways appropriate to each.a. traffic metering. This interconnection hierarchy did not.2) began to develop as soon as commercial ISPs recognized that their interconnection arrangements could be a source of competitive advantage. and operating philosophies. and backbone providers were the wholesalers of the emerging commercial Internet. LLC. Others specialized in providing one form or another of connectivity to one or more specific markets. All Rights Reserved www. NAPs. in turn. interconnection. ISPs served end users by providing connectivity between them and the rest of the Internet. a.k. 2. led many ISPs to explore direct interconnection of their networks with those of other ISPs. End users connected to ISPs by placing calls over the public telephone network to modem banks operated by the ISPs. Some providers were vertically integrated. operating in every business from high-capacity backbone traffic down to dial-up lines. ISPs.5 Internet Service Providers If exchange points. ”exchange points.g.interisle. The Copyright © 2005 Interisle Consulting Group. neutral policy framework within which providers could implement mutually beneficial cost-sharing interconnection agreements. connected to regional or backbone networks at NAPs or exchange points. These exchanges provided a framework that allowed multiple providers of different sizes. Any ISP could connect to one of the public Internet exchange points. particularly for destinations that would be several “hops” away using a public exchange. The economic incentives and tradeoffs that are so richly diverse in today’s Internet (see section 3. however. or via leased circuits of higher capacity. scopes. were the retailers. It was at this juncture that there began to emerge a large number of privately operated NAPs. operational support of routing equipment.
to communicate with other Internet users in Japan or Singapore over a path that led through an exchange point in California (MAE-West). Malecki’s “The Economic Geography of the Internet’s Infrastructure” (Sources and References). LLC.3. the customers of every ISP could communicate with the customers of every other ISP.6 Internet Exchange Points outside of North America Because the Internet developed earlier. Edward J. the cost of connecting through an exchange point on the east coast of the U. in North America than in other parts of the world13. for example. The fear of Internet “balkanization” as a result of large ISPs refusing to interconnect with smaller ISPs is. All Rights Reserved www. and the variety of different ways in which the rapidly expanding Internet services market drove the development of creative combinations of public and private ISP interconnection. which meant that even where a link existed between. whether or not any particular pair of ISPs installed an explicit public or private interconnection. in today’s Internet. the interconnection arrangements between North American ISPs and networks in other countries initially were biased strongly in favor of the North American ISPs. could be an order of magnitude lower than the cost of a direct connection .net . rather than the consumers. and from the much more favorable (largely unregulated) economics of Internet telecommunications in North America than in most other countries. Germany and France.interisle.ISP Peering and Interconnection Page 11 growing number of ISPs. see. 13 With the notable exception of the UK. with the Asian network operators paying the full cost of the trans-Pacific links. Copyright © 2005 Interisle Consulting Group. completely unfounded. and more rapidly. for example. ensured that the Internet as a whole would always be fully interconnected. it was common for Internet users in Taiwan.12 2. of 12 The topology of Internet interconnection has emerged over the past decade as an important factor in studies of Internet resilience and survivability. Until relatively recently. A corollary to many of these studies is the observation that the selfhealing properties of the Internet architecture guarantee that the Internet as a whole will remain fully interconnected even if most of the direct connections between individual ISPs were removed.S. which was connected to the ARPAnet much earlier than any other non-North American country. for example. Because North American Internet users were overwhelmingly the sources. This imbalance arose both from the early absence of an exchange infrastructure in other parts of the world.
owned and operated by a literally uncountable array of providers: private and public. ISPs in non-North American countries were determined to correct this imbalance by forcing North American ISPs to subsidize the cost of inter-regional links. as dozens of viable regional Internet exchanges have emerged outside of North America14.net . financial. Market forces now drive ISP interconnection decisions in many other countries as effectively as they do in North America. 3) detection of and response to denial of service attacks (and possibly other forms of distributed. ISP interconnection. LLC. Copyright © 2005 Interisle Consulting Group. ranging from individual home users’ dial-up connections to globe-spanning networks of massive capacity. administrative. involves a number of issues that go beyond simply splicing together traffic streams. Interconnection is goverened by a wide variety of bilateral and multi-party arrangements. they had very little incentive to defray the cost of connections to other countries. 14 A current list of Internet exchange points is maintained at https://www. special-purpose and generalist.php. multi-ISP attack that have yet to be seen). However. All Rights Reserved www. As recently as five years ago. 60 of the 92 listed exchanges are located outside of North America.ISP Peering and Interconnection Page 12 Internet content.interisle. 2) the provision of services. local and global. and legal perspective. from a technical. large and small. at the time of this report. 3 Interconnection in Today’s Internet The fabric of today’s Internet is stitched together from a huge variety of links and individual networks. that semantically span multiple ISPs.peeringdb. particularly “quality of service” (QoS) dependent services. operational. the pressure to regulate international ISP interconnection in favor of non-North American ISPs has substantially evaporated. all of which require cooperation and collaboration among multiple ISPs: 1) secure exchange of interdomain routing information.com/private/exchange_list.
architectural.1 The Internet Approach What can loosely be termed “the Internet approach” has become the dominant paradigm in networking.1. the recent IETF proposal). end-to-end ownership of the transport infrastructure by a single provider). wiretap.ISP Peering and Interconnection Page 13 4) control of spam. other architectures (e.net . ISP interconnection operates very differently in the Internet than its counterpart does. business. and continued Copyright © 2005 Interisle Consulting Group.g.g.g. and compelling. their ability to create and maintain technical. self-regulating groups that have proved. and • other forms of governance (e. it is that the current approach relies on underlying processes that are flexible. SNA). the centralized and heavily-managed PSTN circuit switching—and in the policies and economics that govern interconnection arrangements.. adaptive. time and again.). The Internet approach has displaced: • • • other technologies (e. phishing. All Rights Reserved www. LLC. other business models (e.1 Interconnection Architecture 3. broad interoperability.. frame relay). and 5) enforcement of national public policy mandates (universal service. monolithic. regulated monopolies or governmentowned PTTs). for example.25. and governance policies and practices that encourage high-quality engineering.interisle. What has given vitality to the Internet approach isn’t simply that the current approach meets the needs of the current environment. 3. The differences are observable both in the basic architecture of interconnection—the decentralized and self-organizing “Internet approach” to packet switching vs.g. etc. emergency warning (cf. point-to-point leased circuits. x. in the more familiar public switched telephone network (PSTN). The Internet approach is driven by self-organizing. and other intrinsically multi-ISP exploits.
while truly representing global consensus and thereby keeping participants on board. over a 20 year history. no members.interisle. with a charter to promote and coordinate the interconnection of networks within North America 15 Tao of the IETF—A Novice's Guide to the Internet Engineering Task Force. within the Internet Society. coordinated by the Internet Architecture Board (IAB) and housed. LLC. 3.1. The IETF is: “…a loosely self-organized group of people who contribute to the engineering and evolution of Internet technologies. and no dues. the operators of interconnected networks have met both informally and formally to share technical information and coordinate operating principles and practices. 3. The IETF is unusual in that it exists as a collection of happenings.1. Almost every aspect of Internet technical development. but is not a corporation and has no board of directors. and public policy. (see Sources and References).1. It is the principal body engaged in the development of new Internet standard specifications.1. administratively. All Rights Reserved www.1 Technical Standards Internet technical standards are developed through the activities of the Internet Engineering Task Force (IETF). operation. and governance is managed by a self-organized.ISP Peering and Interconnection Page 14 creation of value. Selfregulation has allowed the Internet to adapt quickly and efficiently to the rapid pace of change and innovation in telecommunications technology. Copyright © 2005 Interisle Consulting Group.”15 The “loosely self-organized” IETF and related organizations have proven. called the “North American Network Operators Group” (NANOG).net . self-regulating structure.2 Operating Principles and Practices Since the earliest days of the Internet. operations. and this fact has often been cited as the key to the Internet’s phenomenal success. to be effective at establishing workable standards and highly adaptive to the rapid growth and change that have occurred within the Internet. members of the former NFSNET “Regional-techs” meeting formed an expanded group. In the 1990s.
interisle.e. Another measure of the effectiveness of NANOG is that other regions of the world have replicated the approach and have developed or are developing similar groups. The fact that North American Internet users enjoy transparent access to the entire Internet. or “lightbulbs. there are two key types of resources in play: Physical.3 Resource Allocation One of the most important governance functions in any domain is promoting an efficient exchange of value and allocation of resources. All Rights Reserved www. LLC. such as “coca-cola. and virtual resources. Domain names.1. Copyright © 2005 Interisle Consulting Group. constitute one highly visible class of valuable virtual resource in the Internet.net .com”. testifies to the success of the self-regulating NANOG model. with the technical infrastructure required to cause the names to perform their intended function. In the Internet. serving as an operational forum for the coordination and dissemination of technical information related to backbone and enterprise networking technologies and operational practices. tangible infrastructure such as communications links and switching facilities. Domain names combine aspects of traditional intellectual property (i. including: • • • • • • • AfNOG—the African Network Operators Group SwiNOG—the Swiss Network Operators Group JANOG—the JApan Network Operators Group FRnOG—the FRench Network Operators Group NZNOG—the New Zealand Network Operators Group SANOG—the South Asian Network Operators Group PACNOG—the Pacific Network Operators Group 3.1. regardless of the ISP to which they happen to be locally connected. NANOG has been highly effective in allowing ISPs and backbone providers to coordinate their activities to efficiently provide seamless service to a broad market. trademarks and service marks).ISP Peering and Interconnection Page 15 and to other continents.com”.
marketdriven process • • The allocation of IP addresses The operation of the mechanism (also highly decentralized) whereby names are resolved to addresses.ISP Peering and Interconnection Page 16 Another important virtual resource is the IP Address. to promoting competition. Under any addressing scheme. there are only a fixed number of addresses available. an essential function for the proper operation of most Internet services. consensus-based processes. All Rights Reserved www.1. through a highly decentralized. From its own description: “As a private-public partnership. In its simplest form. broadly participatory organization responsible for overseeing: • The allocation of domain names. ICANN is dedicated to preserving the operational stability of the Internet. ICANN. the IETF can establish an addressing scheme (and has done so). but there still needs to be a mechanism for allocating the addresses. LLC. and to developing policy appropriate to its mission through bottom-up.2 Interconnection Arrangements From a purely technical standpoint—that is. the operators groups can establish a plan for deploying it. to achieving broad representation of global Internet communities. an Internet exchange point is a physical place (typically a room in a building) in which Internet routers Copyright © 2005 Interisle Consulting Group. is an international.net .” 3. the Internet Corporation for Assigned Names and Numbers.interisle. in which routers connected by communication links of various kinds compute routes through the Internet based on information they have received from hosts (end users) on any networks to which they are directly connected and from other routers. unencumbered by policy or economics—ISP interconnection is no more complicated (or controversial) than simple internetworking. the numerical address by which each computer connected to the Internet is uniquely addressable.
LLC. for example. When multiple carriers are involved. but this is not the classic “holdup” scenario that can arise from simple refusal to interconnect in the PSTN world. All Rights Reserved www. where call re-routing depends on the prior negotiation and provisioning not only of alternative circuits but also of switch ports and switching fabric capacity. without loss of data or manual re-configuration. Copyright © 2005 Interisle Consulting Group. that a group of Internet users who are customers of ISP B can be reached through an exchange point to which both A and B are connected.ISP Peering and Interconnection Page 17 are installed. 17 Some ISPs will refuse to carry traffic that originated with another ISP that has been “blacklisted” for sponsoring spam or phishing attacks. Traffic from users on A’s network to users on B’s network would flow over A’s network as far as the exchange point. it can quickly re-route traffic through some other exchange point. if an ISP’s link to one exchange point (or the exchange point itself) fails. the way in which traffic flows are managed at exchange points is much more complicated than in this example. there 16 In practice. or to a direct connection to another ISP. of course. and decide to use the exchange point to reach those users. The most important difference between this model of Internet interconnection and the circuit-switching model of the PSTN is that the Internet dynamically selforganizes to find paths from one point to another without explicit preconfiguration or setup.interisle.net . using routing protocols such as the Border Gateway Protocol (BGP). ISPs that want to use the exchange point to connect to other ISPs run one or more links from their own routers to the exchange point. and then over B’s network. In today’s richly-interconnected Internet.16 A similar arrangement obtains when two ISPs decide to connect their networks directly to each other. rather than at a third-party exchange point. In the Internet. and connect them to the exchange point routers. this process is much less dynamic (and much less robust) in the PSTN. The ISP routers and the exchange point routers exchange information about where different groups of Internet hosts—identified by their IP addresses—are located. the possibility that an ISP could find itself unable to connect its customers to some part of the Internet because one or even many other ISPs refused to interconnect with it17 is vanishingly small. ISP A might learn.
increasingly the market has become one in which networks publish their policies openly18.1 Interconnection Agreements At its most basic.2 Interconnection Policy and Economics Interconnection policy refers to the way in which the technical and contractual arrangements that ISPs negotiate with each other to interconnect directly or at public or private peering points (Internet exchanges) are influenced by (a) the business objectives and policies of each of the parties. 18 Representative examples of large.net/network/peeringpolicy.interisle.speakeasy. regulations. 3. the fact that they have become increasingly public speaks to an increasingly transparent. and other public policy instruments that apply to the jurisdiction in which the interconnection takes place. medium. Aside from the publicly available policies providing a useful look into the economics of peering. or (third example). particularly when those parties are large ISPs. or pay you. and small networks’ peering policies are the MCI UUNet policy (at <http://global. public and private. and (b) external mandates arising from laws. and the architecture of the Internet ensures that traffic will flow end-to-end regardless of where an ISP is connected. All Rights Reserved www. LLC.” Interconnection agreements are often tailored very carefully and minutely to the specific circumstances of the parties involved. Copyright © 2005 Interisle Consulting Group. an interconnection agreement says “You carry some traffic for me.net . Interconnection economics refers to the way in which interconnecting ISPs assess and manipulate the economic variables that determine the viability of interconnection as a business proposition.ISP Peering and Interconnection Page 18 are simply too many available connection points.com/uunet/peering/>). 3. the Speakeasy policy (at <http://www. or some combination of the two.php>). participatory market. While it was once the case that networks were quite private about their peering policies.2. in return for which I’ll do something—either carry traffic for you.mci.
net . All Rights Reserved www. for delivery to the accepting network’s customers. • Each accepts traffic destined for its own customers (peering). the operator settles through the exchange for traffic that others carry on its behalf and that it carries on behalf of others. it is possible to consider them all as variations on a common theme (see Table 1) : • Networks “A” and “B” connect to each other. As with bilateral settlements. One operator. destined not only for its own customers but for third party networks with whom the provider in turn connects. possibly through a thirdparty exchange point or other intermediary. 4) Multilateral exchanges.ISP Peering and Interconnection Page 19 The current environment is one in which a heterogeneous mix of network providers—large and small. When all the different network interconnection arrangements are considered. the net settlement amount would be zero) 2) Sender Keep All. There. Neither network delivers traffic to third parties on behalf of the other. accepts traffic originating within the other’s network. Two operators interconnect. Each charges for the volume of traffic it accepts from the other. local. ( It follows that if the value of traffic in both directions is equal. LLC. public and private—connect to each others’ networks under a variety of arrangements. traffic is routed to other operators’ networks via equipment provided by the exchange and according to rules administered by the exchange. a (usually commercial) facility carrying connections from multiple operators. But no charge is made. and global. Each accepts traffic destined for its own customers and originating within the other’s network. Copyright © 2005 Interisle Consulting Group. two operators each accept traffic from the other. and/or for the customers of other networks to which it is in turn connected (transit). the provider. The provider charges a fee for carrying the other network’s traffic. national. which adhere to one of four basic models: 1) Bilateral settlements. 3) Transit. An operator connects to an exchange.interisle.
All Rights Reserved www. publicly-advertised factors include: • Geographic coverage of the two networks: either overlapping. or it is a multi-party agreement. or preferentially choose interconnection partners where the peering relationship gives access to a desired technology. or it doesn’t. • Technical factors: networks may require certain technical standards.net . possibly through a third party intermediary).ISP Peering and Interconnection Page 20 • The arrangement either includes a cash payment made by one network to the other (again. or non-overlapping.2 Micro-economics of Interconnection Many economic and business-policy factors affect an individual ISP’s decision to peer or not to peer with another ISP. such that a peering relationship would extend each network’s geographic reach. Copyright © 2005 Interisle Consulting Group. the pricing19 External. 19 Two recent studies of peering economics are reported in Economics of Peering and A Business Case for Peering in 2004 (see Sources and References).2. and in the case of a paid arrangement (bilateral settlement or transit).interisle. “A” accepts traffic for: Its own customers only Other networks to whom it connects “B” accepts traffic for: Its own customers only Other networks to whom it connects Other Financial settlement None Cash Through an Exchange Multi-Party Networks connect: Directly Nature of Agreement Bilateral Table 1: Any given interconnection arrangement can be characterized by choosing one value from each of the columns above. LLC. • The arrangement is either purely bilateral. 3. such that a peering relationship would be symmetrical.
bearing the cost in effect of two transatlantic hops. Anticipated traffic volumes. for example). some obvious (direct cash payment. cost-effective transit. the implicit assumption that the cost of a link. In some cases. All Rights Reserved www. Size: networks may choose to peer only with similarly sized networks. in a perfectly fair market. Additional.net . for example. if one network’s specific geography or customer mix or traffic mix dovetails with an important element of the other network’s strategy. it is extremely difficult to analyze the economics of any particular interconnection arrangement using external.interisle. In any given case. At a theoretical level. should be borne by the two connected parties in proportion to the volume of traffic they Copyright © 2005 Interisle Consulting Group. idiosyncratic factors apply. it would lead to a higher perceived value and price than otherwise. or access to a large user community. where the value of the arrangement to each of the parties is determined by a number of factors. that certain bilateral relationships between overseas and US-based networks are “unfair” on the grounds that the cost of the transatlantic or transpacific link was borne entirely by the overseas network. Because so many idiosyncratic factors affect each interconnection decision. the arrangement is made on the basis of a perceived equitable exchange of value between the two interconnecting parties. objective criteria in order to determine whether or not the market is distorted and the agreement gives either party undue advantage. LLC. where as the origination of traffic was split more evenly between the two. Routing: networks may require specific routing policies and practices. For example. The argument has been made in the past. Two arguments against intervention apply here: one addresses the argument itself and the other examines historical outcomes. others entirely idiosyncratic .ISP Peering and Interconnection Page 21 • • • • Operational: networks may require a certain level of operational support. European ISPs in one country were connecting to US backbones in order to send traffic back to a neighboring European country.
interisle.2. financial desire to avoid paying transatlantic round-trips to connect to one’s neighbor. does not mean that X’s customers will be unable to reach Y’s customers: X always has the option of buying transit from some third party who is in turn connected to Y. it has been observed that the European networks now connect to each other at multiple exchange points within Europe. (Y has a strong incentive not to make the terms of interconnection too onerous for at least some well-connected peers.ISP Peering and Interconnection Page 22 originate. On a more pragmatic level. including “Internet interconnection and the off-netcost pricing principle”: “The purpose of this article is to develop a framework for modeling the competition among interconnected Internet “backbone operators” or “networks. at risk of cutting its customers off from regions of the Internet) In addition to the intrinsic choice. An essential characterization of a market is its liquidity. connectionless architecture. All Rights Reserved www. and not regulatory intervention. it is worth examining the overall characteristics of the market in which these arrangements happen. Models of interconnection economics have been developed by <<citations. is flawed due to the additional factors other than traffic volume. and that anything else is perforce distored. connection-oriented public telephone networks. the overall economic environment in which interconnection agreements are negotiated can be characterized as a free market with a large number of players. discussed above.“>> Copyright © 2005 Interisle Consulting Group.net .3 Macro-Economics of Interconnection In addition to examining the factors influencing a single interconnection arrangement. 3. choice is intrinsic to the Internet’s routed. as contrasted with the circuit-switched. LLC. that influence the value of interconnection to either party. that led to the emergence of this more effective network topology. Just because ISP “X” can’t strike a satisfactory bargain with ISP “Y”. Does a buyer or a seller have a choice of many parties to deal with? Or is there a monopoly or oligopoly limiting choice? In some sense. It was the rational.
and damage to the end consumer. Given the idiosyncratic nature of peering decisions.interisle. a slower pace of innovation.”20 It is worth following these predictions to determine their accuracy and applicability. geographic footprints. or other obvious criteria. fewer choices. been considerable consolidation in the ISP market. founder and CTO.ISP Peering and Interconnection Page 23 It has been suggested that the free market operation of ISP interconnection would be threatened by consolidation and the emergence of a small number of dominant players. resulting in the usual effects of reduced competition: higher prices overall. tracking the number of backbone operators and the entry barriers to the backbone business is likely to provide insight into the dynamics of the market. 20 Jay Adelson. who would be able to form in effect a cartel and disadvantage their competitors. Is it hurting the market? In assessing this question. Recently. it has been claimed that the barriers to entry in the backbone business have been lowered. implies market distortion. On the other hand. 2005 ISPCON conference. It will draw upon specific examples and case studies of ISPs that have leveraged this trend. it is important to understand what might be the symptoms. Session announcement. Equinix. The presentation will be technical and geared toward an engineering audience. it is not clear that just because the cash economics of given a peering arrangement do not track the data transport volumes. LLC. There has. This presentation will review pricing trends and the opportunities that are being created for small and regional networks. uncompetitive. as well as a review of specific products and their price points. for example: “Trends in transport pricing over the past six months have created a disruptive change by lowering the barriers for small and regional networks to develop robust national backbones for application delivery. network performance and business expansion. All Rights Reserved www.net . or signatures of a distorted. peering. oligopolistic or monopolistic market. in fact. Copyright © 2005 Interisle Consulting Group.
In the PSTN. voice is both the application and the driver for the architecture of every other part of the system. and the architecture of the PSTN is highly application-sensitive. More recently. Because the architecture of the Internet is application-insensitive.ISP Peering and Interconnection Page 24 4 New Challenges The Internet approach to interconnection faces several new challenges. 4.net . and at the IP layer a VoIP packet is indistinguishable from any other data packet. This was the focus of NRIC V Focus Group 4. In November 2003. The fourth. which has traditionally been the vehicle for global voice telecommunications. the final report of NRIC VI Focus Group 3 dealt with VoIP: “The recommendations and best practices included in this report address the interoperability of Voice over Internet Protocol (VoIP) and the Public Switched Telephone Network (PSTN). In the Internet. for example. attention has been focused on interoperability at the application layer—VoIP in particular.interisle. does not observe the same functional layering as do IP networks. The first three challenges described below are well within the scope of the “Internet approach”: the existing policy mechanisms are well equipped to adapt to these changes. interoperability between the Internet and the PSTN is freighted with serious difficulties. as it has to other challenges and changes over the past decades. All Rights Reserved www. voice is just another application.” Copyright © 2005 Interisle Consulting Group. as they have to equally disruptive challenges and changes in the past. In 2000 the final report of NRIC V Focus Group 4 (see Sources and References).1 Multi-Layer Interconnection Arrangements Today: interoperability and interconnection at the packet level (architecture—the Internet hourglass model). LLC. dealt with ISP interconnection at the level of packet exchange—how IP packets are conveyed across the boundary (physical and administrative) between different ISPs. are in many senses orthogonal to the operation of the Internet itself. which will force it to adapt. relating to external attempts to bypass the selforganizing aspects of the Internet approach and impose poicy. This comes about in part because the PSTN. and represent a significant and potentially distorting force.
In every arena: technical standards. the economic decisions surrounding a provider’s decision to interconnect. addressing the “Digital Divide” at a national or global level. As the Internet becomes more of a core enabler of human activities. inclusive organizations.2 Balkanization Potential for balkanization of the Internet as backbone ISPs try to differentiate themselves (competitively) by offering services only to their own customers. 26). it may start to look like a tool for the achievement of public policy objectives (for example. resulting in a network infrastructure that does not provide a uniform. and representing a broad constituency. This will affect technical standards. All Rights Reserved www. and others. operating practices.3 Traffic-Load Sensitive Peering Agreements Today: peering agreements are almost uniformly traffic-load insensitive. or controlling trans-border data flows).net .interisle. resource allocation. and the overall market. 5 Conclusions Today's Internet is the way it is because of the way it developed. Copyright © 2005 Interisle Consulting Group. LLC.4 Government Intervention Government attempts to control various aspects of the Internet (ITU. national governments). interconnection arrangements are likely to involve multiple layers of the Internet architecture.ISP Peering and Interconnection Page 25 With the rise of VoIP and QoS-dependent applications. which concluded at the time that balkanization was not likely to occur because of other forces. operating with a high degree of transparency. (see OPP WP 32 pg. 4. universal standard of coverage. the terms of interconnection agreements. policy is established by self-organized. 4. operating practices and policies. This was anticipated by studies conducted in the late 1990s. Possible emergence of a traffic-sensitive settlement system as ISPs in different situations try to deal economically with the asymmetry inherent in WWW. 4.
On the other hand.pdf The Digital Handshake: Connecting Internet Backbones. the self-organized. FCC Office of Plans and Policy Working Paper No. to redress perceived inequalities in access or pricing. September 2000. The incentives are well aligned: due to the network effect. and watch for the signatures of a distorted market. 34. 32.pdf A Competitively Neutral Approach to Network Interconnection. Regulatory policy-makers should remain attuned to the possibility that future developments would lead to a less competitive environment. no matter how well intentioned or carefully crafted. July 1999. and run the risk of being destabilizing and harmful. December 2000. should refrain from action.gov/Bureaus/OPP/working_papers/oppwp34. the participants wouldn't follow. and the policy makers would lose their mandate. Jay M.net .fcc. December 2000. FCC Office of Plans and Policy Working Paper No. 6 Sources and References The FCC and the Unregulation of the Internet.ISP Peering and Interconnection Page 26 This approach is nearly inevitable. for example). FCC Office of Plans and Policy Working Paper No. http://www. Michael Kende. global market in which the Internet operates.interisle.gov/Bureaus/OPP/working_papers/oppwp33. Atkinson and Christopher C. given the inherently decentralized native architecture of the Internet and the heterogeneous. 33. continued growth of the Internet is a rising tide that lifts all boats.fcc.pdf Copyright © 2005 Interisle Consulting Group. FCC Office of Plans and Policy Working Paper No. 31. http://www. At present. decentralized nature of the Internet.fcc.gov/Bureaus/OPP/working_papers/oppwp32.pdf Bill and Keep at the Central Office As the Efficient Interconnection Regime. LLC. either in the service of "improving" the Internet itself. All Rights Reserved www. which creates a strong bias toward policies that facilitate growth and efficiency.gov/Bureaus/OPP/working_papers/oppwp31. Jason Oxman. top-down attempts to regulate.fcc. which is an important source of the Internet's vitality. http://www. If the policy making organizations didn't respond to that imperative. Patrick DeGraba. Barnekov. but until such problems present themselves. or in furtherance of orthogonal policy objectives (solving the “digital divide” problem. are contrary to the fundamental. self-regulating aspects of the Internet are thriving. http://www.
pdf> Economic Trends in Internet Exchanges.pdf> The Art of Peering—The Peering Playbook. No.com/pdf/whitepapers/PeeringEcosystem. 1998.ISP Peering and Interconnection Page 27 Evolution of Internet Infrastructure in the Twenty-First Century: The Role of Private Interconnection Agreements.nric. <http://www. Presentation at the 1999 Internet Society Conference (INET 99). <http://vjolt.interisle.com/peering/downloads/A Business Case for Peering in 2004. February 2005.net/documents/papers/Gibbard-peering-economics. and Pavan Gundepudi. 1998. < http://www.net/resources/papers/asia-pac-ix-update/asia-pac-ixupdate-v11.doc> NRIC VI Focus Group 3 Final Report. Rob Frieden. November 2003.org/pubs/nric5/2B4appendixb. FCC Network Reliability and Interoperability Council.S.nric. May 2002. April 2005.pdf> Copyright © 2005 Interisle Consulting Group.pdf> The ISP Survival Guide: Strategies for Running a Competitive ISP.org/inet99/proceedings/1e/1e_1. William B. November 2003. 2. Geoff Huston. 34.org/pubs/nric5/2B3finalreport. Cambridge: MIT Press (2000): 175-195.equinix.htm > Without Public Peer: The Potential Regulatory and Universal Service Consequences of Internet Balkanization.pch. Marshall Friemer. Norton. Fall 1998.net . Norton. September 2000.” New York City. <http://www. Reprinted from The Internet Upheaval. October 1999.pdf> Economics of Peering. Geoff Huston. 14 September 2004.stanford. Internet Peering Ecosystem.equinix.edu/~milgrom/publishedarticles/TPRC 1999. Paul Milgrom.student. Patrick Rey.internet peering. Bridger Mitchell.net/info/wp20020625. June 1999.edu/graphics/vol3/vol3_art8. William B. Summer 2003 pp. Ingo Vogelsang and Benjamin Compaine (eds).ppt> Competitive Effects of Internet Peering Policies. <http://www. <https://ecc. FCC Network Reliability and Interoperability Council.html> The Evolution of the U. and Padmanabhan Srinagesh. William B.virginia. Internet interconnection and the off-net-cost pricing principle. 370–390. Wiley Computer Publishing. Steve Gibbard. Appendix B: Service Provider Interconnection for Internet Protocol Best Effort Service. University of Rochester. <http://www. Bill Woodcock. September 2004.pch. 2000. <http://www. All Rights Reserved www. NRIC V Focus Group 4 Final Report. Rajiv Dewan. and Jean Tirole. Scott Marcus. Norton. <http://www. <http://www. Jean-Jacques Laffont.isoc. 3 February 2005. LLC. RAND Journal of Economics Vol.pdf> A Business Case for Peering in 2004. Virginia Journal of Law and Technology. Presentation to “Gigabit Peering Forum IX. Peering and Financial Settlements in the Internet. Interconnection.xchangepoint. Presentation to NZNOG 2005 conference.
ISP Peering and Interconnection Page 28 Internet Economics.clarku. < http://www.interisle.edu/econgeography/2002_04.net . Edward J.tmdenton. LLC. Bailey (eds.). Lee W. Timothy Denton. MIT Press. October 2004. Susan Harris and Paul Hoffman.html> Copyright © 2005 Interisle Consulting Group. Netheads vs. McKnight and Joseph P. <http://edu. May 1999. Bellheads: Research into Emerging Policy Issues in the Development and Deployment of Internet Protocols.pdf> Tao of the IETF—A Novice's Guide to the Internet Engineering Task Force. All Rights Reserved www. Malecki.com/pub/bellheads.org/tao> The Economic Geography of the Internet’s Infrastructure. October 2002. 1997.ietf. <http://www.
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